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Checking accounts set for unwelcome transformation

NEW YORK - Free checking accounts may be one step closer to extinction.

Regulatory changes to be issued July 21 are expected to sharply limit the fees that banks can collect from merchants whenever customers pay with debit cards.

An attempt to delay implementing the rule by a year was narrowly defeated this week, meaning banks will be looking in earnest for ways to make up an estimated $14 billion in lost revenue.

Customers have already seen the fallout start to take hold.

Bank of America is testing a new lineup of accounts that come with fees ranging from $6 to $25, depending on the level of service selected. Citi already revamped the terms on its checking accounts last year to include higher fees in many cases. Chase, PNC Bank and Wells Fargo ended or scaled back their debit rewards programs.

Here's what consumers should watch:

Free checking: It's still relatively easy to find a free checking account. But it's becoming more likely that there will be conditions you have to meet to avoid monthly fees.

Debit rewards: Rewards programs for debit card purchases are a valued perk for many checking account customers. But they may soon only be available to the top customers, if at all.

ATM fees: When customers use another bank's ATM, they can be slapped with two fees - one from their bank and one from the bank that owns the ATM. This is an easy opportunity for banks looking to raise revenue.

New fees and products: Customers may also start seeing never-before-seen fees pop up. Chase, for example, is testing a $3 monthly fee in northern Wisconsin for checking account customers who want a debit card.

Deeper relationships: To offset the drop in revenue, banks are increasingly looking to deepen customer loyalty and capture a greater share of their business. So you may be offered fee waivers on checking accounts for opening additional accounts, whether it's a credit card, savings account or mortgage.

Bank of America is testing tiered accounts in Georgia, Massachusetts and Arizona.

Those who maintain higher balances across accounts are rewarded with greater perks.

Customers who select the highest level of service, for example, can earn rewards at five times the normal rate on select purchases with their credit cards.

Meanwhile, those who want a free checking account without meeting any conditions at Bank of America now have to do their banking online and opt for e-statements.

"A lot of institutions are going to be pulling back on everyone except their best customers," says Ken Clayton, chief counsel for the American Bankers Association. "The vast majority of individuals who don't have that kind of relationship will lose access to certain benefits."